European markets higher ahead of ECB, UK stocks down after Carney and BoE

The German DAX 30 (+0.12%), the French CAC 40 (-0.08%), the Italian FTSE MIB (+0.66%), and the Spanish IBEX 35 (+0.65%) are up ahead of the ECB policy decision and Draghi's press conference, expected to address the liquidity and euro strength issues. “The higher EUR-USD prices are therefore mainly a reflection of increased investor confidence, which Draghi is likely to welcome”, wrote Commerzbank analyst Karpowitz, adding that he will not be prepared to begin a debate about an active exchange rate policy, an absurd proposal.

The French trade deficit with the EU widened from €-4.3B to €-5.3B in December, instead of narrowing slightly to €-4.2B as expected. Both imports (€43.137B) and exports (€37.788B) increased. There were small revisions to the German IP, that came in pretty much in line with expectations at 0.3% M/M in December (cons 0.2% prior –0.2%).

The British FTSE 100 is down by -0.26% in antecipation to the BoE announcement and after incoming BoE Governor Carney's testimony before the UK Parliament. The MPC decided to keep the key rate at 0.5% and the asset purchases at £375B, as expected by investors, in the meeting of February 7. “The MPC continues to judge that the UK economy is set for a slow but sustained recovery in both demand and effective supply, aided by a further easing in credit conditions – supported by the Bank’s programme of asset purchases and the Funding for Lending Scheme – and some improvement in the global environment”, said the statement, eyeing risks to the downside, not least because of the challenges facing the euro area.

Carney assured that he would not alter significantly the central bank's current monetary policy strategy but that he was in favor of introducing more stimulus for a period of time and communicating it in order to help manage market expectations. He also said that the central bank must exit unconventional policy.

Futures for the American S&P 500, Nasdaq 100 and Dow Jones 30 are signaling a higher opening around +0.15%, ahead of US jobless claims and Nonfarm Productivity. The European Council us due to meet at 14:15 GMT, with the agenda focused on agreeing to the 2014-2020 budget.

Feb 7, 2013

UK: BoE maintains 0.5% rate and £375B QE

The MPC decided to keep the key rate at 0.5% and the asset purchases at £375B, as expected by investors, in the meeting of February 7. “The MPC continues to judge that the UK economy is set for a slow but sustained recovery in both demand and effective supply, aided by a further easing in credit conditions – supported by the Bank’s programme of asset purchases and the Funding for Lending Scheme – and some improvement in the global environment”, said the statement, eyeing risks to the downside, not least because of the challenges facing the euro area.

Forex: GBP/USD hovering over 1.5700 after BoE

The sterling is orbiting around the key mark at 1.5700 after the BoE left no space for surprises, leaving both the lending benchmark and the asset purchase programme intact at 0.50% and £375 billion, respectively...